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The benchmark Sensex closed at 28,773 after gaining 265.7 points or 0.93 per cent, while the Nifty climbed 90.3 points, or one per cent, to close at 8,867.45. Even the broader markets advanced during the session as the BSE Midcap and Smallcap indices gained 1.39 per cent and one per cent, respectively. The Sensex and Nifty have rallied more than 25 per cent from their lows in February 2016. On a year-to-date basis, the Sensex has gained more than 10 per cent.
“The upward movement in the Indian markets on Thursday was on the account of a pent-up demand in the market. In the second half, the markets also reacted to the news about appointment of three external members for the monetary policy committee,” said Rikesh Parikh, vice-president (equities) at Motilal Oswal Financial Services.
The Indian rupee strengthened 0.53 per cent on global dollar weakness to close at 66.67 a dollar, up from its previous close of 67.02 a dollar. Most of the Asian currencies gained on Thursday, led by South Korean won that rose 1.549 per cent in the day. The dollar index, which measures the greenback’s strength against global major currencies, fell 0.48 per cent to 95.204 after the US Fed decision.
According to currency dealers, the Reserve Bank of India did not intervene in the market but some oil marketing companies were actively buying dollars in the morning trade. Dealers expect the rupee’s appreciation bias to continue and the local currency to touch 66.40-66.30 a dollar level in the coming days.
The bullish sentiment was evident on local bonds, too. The 10-year bond yield fell below seven per cent to close at 6.97 per cent as investors expected more foreign inflow in the debt segment.
Foreign portfolio investors (FPIs) bought equities worth $50 million on Thursday, taking the year-to-date purchases to close to $6.8 billion. FPIs bought $1.41 billion in local debt, the most in any quarter since March 2015 as bond yields softened by more than 50 basis points. One basis point is a hundredth of a percentage point. Bond prices rise as yields fall.
Gains in Indian equities on Thursday were led by auto and banking stocks. The sector index for auto companies went up by 1.44 per cent, while the banking index gained 1.49 per cent. Among the Sensex constituents, State Bank of India – India’s largest public sector lender – was the biggest gainer as its shares closed 2.4 per cent higher.
Among the other top gainers were Hero MotoCorp, ICICI Bank and Adani Ports, whose shares climbed more than two per cent during the session.
In terms of valuations, India continues to be premium compared to its emerging market (EM) peers. The one-year forward price-to-earnings ratio of the Sensex currently stands at 18.33, the highest in the EMs universe, according to Bloomberg.
Despite the rate hike possibility by the US Fed in December, analysts continue to be bullish on India due to its strong macro-economic fundamentals.
“The government’s commitment to medium-term fiscal consolidation plan, benign outlook in global commodity prices (crude in particular), likely current account surplus in FY16, stable currency, record forex reserves, and falling consumer inflation on the back of a bountiful monsoon are some of the factors that will help India sail through. Any such correction induced by external factors should be used as an opportunity to buy stocks with a medium-term perspective,” says Ajay Bodke, CEO and chief portfolio manager (portfolio management services) at Prabhudas Lilladher.
According to Tirthankar Patnaik, India strategist at Japan-based Mizuho Bank, Indian equities are likely to remain positive in the near term as there are no major global negatives coming that would upset the positive momentum.
“The positive sentiment will last till the time more moving parts, such as the next-quarter results of India Inc, are added to the overall market sentiment. The US Fed has made sure that the markets are fully expectant and ready for a rate hike in December.”
Christopher Wood, managing director & equity strategist, CLSA, said, “Data-dependent Fed has done nothing as expected, though there is more evidence of the lack of consensus on the Federal Open Market Committee (FOMC) with three dissenters.”
“There has also been a lack of immediate fireworks from the Bank of Japan this week,” he added.
